Nasdaq futures plunged on Monday to lead a stock rout on Wall Street as a Chinese startup rattled faith in US leadership and profitability in AI, taking a hammer to Nvidia (NVDA) and other Big Tech stocks.
Contracts on the tech-heavy Nasdaq 100 (NQ=F) sank nearly 4%, while S&P 500 futures (ES=F) tumbled over 2%. Dow Jones Industrial Average futures (YM=F) fell 0.9%, or about 380 points, on the heels of a winning week for the major gauges.
Markets have been rattled by claims by China’s DeepSeek that its AI assistant uses cheaper chips and less data than leading models, but performs equally well. A surge in DeepSeek’s popularity has spurred a scramble by investors to reassess bets that AI demand-driven growth will keep fueling gains for stocks.
AI bellwether Nvidia’s shares tumbled over 11% in pre-market trading, as chip-related names took a bruising. ASML lost 9%, while Arm (ARM), Broadcom (AVGO), and Micron Technology (MU) also got hammered.
Shares of Meta (META) and Microsoft (MSFT) both slid about 6% amid worries about megacaps’ hefty investment in AI. Tesla (TSLA) and Amazon (AMZN) also lost ground as techs sold off across the board.
Big Tech earnings season kicks off this week, highlighted by results from Apple (AAPL), Tesla, Meta, and Microsoft. Eyes will be on guidance for future profit as DeepSeek casts doubt on prospects for revenue.
Investors started to flock to assets seen as safe as stocks plunged. The 10-year Treasury yield (^TNX) fell as much as 12 basis points to 4.50%, the lowest level in over a month, while haven currencies including the yen and the Swiss franc surged.
In the background, trade war concerns revived during a face-off between President Donald Trump and Colombia over the weekend. Trump threatened to impose 25% tariffs on the country’s goods in a row over deported migrants before putting the duties on pause after a deal was reached.
The dispute underlined concerns that Trump won’t hold back on turning to tariffs as a way to push through a range of policy aims.
The Federal Reserve will hold its first policy meeting of 2025 this week, with officials are already on watch for quick-fire moves by Trump that could pose challenges to the central bank. The president has called for the Fed to lower interest rates, signaling a coming clash with policymakers, who begin their two-day gathering on Tuesday.
LIVE4 updates
24 mins ago
DeepSeek is the main event Monday, but Wall Street reiterates ‘tariffs are coming’
Before Sunday night’s rout in futures turned investor attention squarely to fears about what China’s DeepSeek AI might mean for the future of the US-centric AI investment boom, this past weekend saw President Trump remind investors that tariffs are still at the top of his agenda.
Though a back-and-forth between the White House and Colombia saw the South American nation ultimately accept a deal to take in migrants being deported from the US to avoid immediate 25% tariffs on exports bound for the US, the speed with which the president acted is the key takeaway for investors.
“Tariffs are coming,” wrote Neil Shearing, group chief economist at Capital Economics in a note on Monday.
“That seems to be one of the key takeaways from an extraordinary week which began with relief that the new president’s inaugural address skipped talk of tariffs, but was followed by a stream of threats from Donald Trump to start raising duties on leading trade partners — and ended with reports suggesting tariffs could be imposed on Mexico and Canada as soon as this weekend.
“All of this has poured some cold water on the idea, still lurking in some parts of the market, that the threat to impose tariffs was bluster. It now seems likely that higher tariffs are in the pipeline and, as we have embedded in our central forecasts, that they could be imposed relatively soon.”
Trump’s first week in office, as Shearing notes, was greeted with relief from investors as Trump declined to impose new duties on any major trade partners in an executive action on Monday.
The president later set a Feb. 1 deadline for taking firmer action.
How tariffs have become enmeshed with the fate of TikTok, for instance, ought to serve as a reminder that while the economic implications of tariffs are of interest to investors — notably the impact on inflation and interest rates that may result from higher tariffs — what they symbolize is more important.
Namely, tariffs are the best way for an investor trying to understand Trump’s mindset at any given point in time to get a firm answer.
37 mins ago
Monday’s early action is the risk of stock market concentration
One of the biggest discussions among investors over the last two years has been about how concentrated the S&P 500 has become.
Meaning the percent of the value of the overall index accounted for by the biggest 10 companies is at a record high, as we see in the chart below from Truist Wealth’s Keith Lerner published earlier this month.
There is nothing inherently bad about market concentration, of course.
The most important long-term driver of stock prices is earnings growth, and the biggest companies in the market — the Magnificent Seven, most notably — have been the largest contributors to earnings growth since the AI boom began in early 2023 and are expected to remain that way through this year.
In fact, Wall Street expects Mag 7 earnings growth to reaccelerate in the second half of this year.
And what markets trade on is not what’s happening today, but what investors think will happen tomorrow. Not just the rate of change, but the expected change in the rate of change.
So when these expectations are upset, or even questioned, as seems the fairest characterization of fears about DeepSeek’s capabilities, we get reactions like what we’re seeing in stocks this morning.
Many companies and industries will see unexpected threats to their competitive standing come and go over time.
Investors will constantly be reevaluating their embedded assumptions about earnings growth and, in turn, reevaluating the terminal value of a given company’s future cash flows when discounted back to the present.
It just so happens that this process is playing out Monday morning for the market’s biggest companies, which have never played a larger role in shaping the overall stock market’s direction. And so a few pointed questions end up taking a trillion dollars off the stock market’s value.
51 mins ago
Good morning. Here’s what’s happening today.
Today at 10:56 AM UTC
Eyes on Nvidia rout
Nvidia (NVDA) is getting pummeled pre-market by 10% on fears around China-based OpenAI rival DeepSeek. The concern? DeepSeek reportedly developed its powerful new large language model using far fewer advanced chips than US rivals are using.
I’ll have more to say on this on the Opening Bid podcast episode dropping on Yahoo Finance this morning. But the reaction sure seems overdone.
The notion that Meta (META) is suddenly going to reverse its billions of dollars being spent on AI infrastructure — powered by Nvidia chips — seems far-fetched. Further, can one even trust the claims by DeepSeek? And lastly, DeepSeek’s alleged advances are unlikely to alter the demand backdrop for Nvidia this year — if at all.
Good to really question this type of news thoroughly.
